11 million to 12 million barrels. This huge projected shortage was a direct result of the Middle East cutoff. Los Angeles was buying 48 percent of its residual oil refined from crude oil produced in Arab countries. The purchases were made through five brokers. The brokers are Coastal States Marketing of Houston, Texas; Douglas Oil Company, Newport Beach, California; Edgington Oil Company, Long Beach, California; International Gas Traders, Lugano, Switzerland with Petrobay, Quincy, Massachusetts; and AGIP USA, Inc., an Italian firm with offices in New York City.

City officials said their overall energy shortfall, according to early January 1974 estimates, would be 30 percent to 37 percent. The city hopes to make up about 25 percent through conservation measures. Assuming this goal is reached, Los Angeles could still be faced with a shortfall of from 5 percent to 12 percent. However, an unexpected increase in the availability of hydroelectric power from the Pacific Northwest and additional supplies of natural gas, also unexpected, have substantially reduced the 1974 shortfall projections. In addition, public support for conservation measures is, as of early February, proving more successful than officials had anticipated.

Because about half the city's residual oil came from the Middle East, an end to the Arab embargo would provide Los Angeles with quick relief. Robert V. Phillips, General Manager and Chief Engineer of the Water and Power Department, and James L. Mulloy, Chief Electrical Engineer and Assistant Manager, gave an account of how the City of Los Angeles came to be so dependent on Arab oil.

They said that prior to World War II, the Department's generating capability was based almost entirely on hydroelectric plants at Boulder Dam and along the Owens River Aqueduct north of the City. However, during World War II, the Department, in order to meet the needs of the rapidly growing Los Angeles population, embarked upon the construction of fossil fuel-fired steam plants. Today most of the city's electrical generation comes from these plants. In 1974, for example, 67.8 percent of the Department's energy was to be generated from fuel oil; 8.1 percent from natural gas; 13.5 percent from hydroelectric plants, and 10.6 percent from coal. New developments in hydroelectric power and natural gas will alter those projections.

Until 1970, some 75 percent of the Department's fuel needs were met by natural gas. In 1971, this figure was 64 percent. The remaining 36 percent came from about 7 million barrels of residual oil. In 1972, the oil required increased to about 8 million barrels but natual gas use remained at about the same level, dropping slightly to 63 percent. But late in 1972, the Federal Power Commission, in the El Paso Natural Gas Curtailment Case, reduced the supply of natural gas to California users. In 1973, as a result of this decision, 29.1 percent of the fuel necessary for Los Angeles power plants was supplied from natural gas, Phillips and Mulloy said. About 17 million barrels of oil were required, they reported. Both the Department of Water and Power and the nearby privately-owned Southern California Edison Company have appealed the FPC decision which declared that natural gas should not be burned in utilities' boilers because such utilization of the gas was not a "good end use." Much of the natural gas previously earmarked for Los Angeles was diverted to industrial customers in Arizona, New Mexico and other states.

Mr. Phillips and Mr. Mulloy said another reason for the substantial increase in the amount of oil required for 1973 was a drought in the Pacific Northwest. Ordinarily, they said, the Department would expect to receive large amounts of surplus hydroelectric power from the Bonneville Power Administration over its high-voltage, direct-current transmission line and additional large amounts of purchased energy from other utilities in the Pacific Northwest and the Southwest. Because of the low rainfall and snowfall in the Pacific Northwest during the winter of 1972-73, the Los Angeles utility received no surplus energy in 1973. It was expected that little surplus power would be available from this source this year, but heavy rainfall in this region has improved the situation for now.

During the period when natural gas was a prime fuel source, the Department bought most of its oil on 20-month contracts and shortterm contracts to meet the remaining fuel needs. In the fall of 1972, the Department implemented plans to substantially increase fuel oil supplies. Domestic oil suppliers were informed of the city's requirements for the next three or four years. They were also informed that the Department planned to advertise for oil contracts in the fall of 1972 and the spring of 1973 for long-term commitments extending up to three and a half years. The oil companies offered no comments on or objections to those plans. In November of 1972, the Department requested bids on fuel oil to cover its needs for the winter of 1972 and the spring of 1973 and to provide about one-third of its fuel supplies through 1975. Bids were received on all items.

In March of 1973, specifications were advertised for 1.5 million barrels of residual oil to meet short-term requirements for the summer of 1973 and a larger quantity to supplement the oil to be received under the 1972 bids. Bids were received for only 500,000 barrels on the specifications for the smaller amount and no bids were received. at all for the larger quantities.

The Water and Power Department then went to the Los Angeles City Council to request a "Declaration of Urgent Necessity" to allow the Department to negotiate directly with oil suppliers. The City Council provided the authority. The Department tried to negotiate with domestic suppliers. Response was poor. Domestic suppliers said they had already committed their residual oil. They said they had neither the refinery capacity nor the crude oil supplies to increase their output. Mr. Phillips and Mr. Mulloy said the Department had no choice but to enter the world oil market. The City's buyers bought extensively from Middle Eastern sources. They purchased 10 million. barrels of residual oil from the Middle East in 1973. They expected to buy 11 million to 12 million barrels in 1974. The Arab embargo, then, struck with major impact on Los Angeles.

EMERGENCY ENERGY CURTAILMENT PROGRAM

The people of Los Angeles learned about the seriousness of their own energy situation in a sudden manner that sent shock waves through the city. On December 4, 1973, the Department of Water and Power notified the City Council that energy shortages had reached. the point where periodic rolling blackouts would have to go into effect throughout the city and businesses and industries would have to be

limited to 50 hours of operation a week. Proposed ordinances were drafted that would have given the city authority to impose the rolling blackouts and the 50-hour operating week by mid-January of 1974.

According to the Department's concept of rolling blackouts, any part of the city could find itself without electricity for up to three hours in any one day. There would be no exemptions. Police, firemen, hospitals and other emergency services were to be required to switch over to contingency generators. The 50-hour week proposal would have limited the operation of all industrial and business concerns to no more that 50 hours in any seven-day period. Only pharmacies, hospitals and other emergency health services would be exempted.

James Mulloy, Chief Electrical Engineer and Assistant Manager of the Department of Water and Power, said these drastic measures were needed because nearly half the city's residual oil supply for 1974 would not be forthcoming. In a public statement, Mr. Mulloy warned that Los Angeles would be short some 11 million barrels for 1974. In the short term, he said, Los Angeles had enough oil to meet all requirements for only the next 90 days, which meant the city was assured of its electrical power through February of 1974 and no further.

Reaction to the Department's emergency proposals was swift and negative. Many observers felt that such a plan, if implemented, would create an immediate regional economic depression. Dan Waters, Executive Director of the Central City Association, representing major downtown business interests, said 100,000 persons would lose their jobs if the 50-hour operating week were adopted. The Los Angeles Times reported that traffic jams in supermarket aisles, delayed payroll checks, disrupted factory production schedules and widespread unemployment could hit the local economy if the emergency proposals were accepted. Sigmund Arywitz, Executive Secretary-Treasurer of the Los Angeles County Federation of Labor, AFL-CIO, said, "We're opposed to the 50-hour week and will fight it to the end . . . there would be no entertainment industry, no food industry, no food production industry. . .

While causing considerable criticism, the Water and Power Department's emergency proposals, because they were so extreme, led city officials and leaders to seek other solutions to their energy problems. In this pursuit, Mayor Bradley's ad hoc Committee on Energy Curtailment, whose members came from industry, commerce and labor, had issued a series of proposed ordinances to reduce energy consumption. Given impetus by the Water and Power Department's dire warnings, the ad hoc Committee's energy curtailent measures were accepted by the City Council and Mayor Bradley December 13, 1973.

The ordinances comprise the city's Emergency Energy Curtailment Program. The program is divided into Phase I and Phase II. Phase I went into effect December 21, 1973. It limits the use of electricity in street lighting, business signs, billboards, outdoor decorative lighting, moving advertising signs, pumps for fountains, outdoor business lighting, comfort heating and cooling of businesses, indoor business lighting, lighting for residential swimming pools and outdoor non-commercial and commercial recreational and cultural activities.

Using a formula founded on a specified previous base period, Phase I requires reductions in the use of electrical energy of 10 percent by

residential and industrial customers; and 20 percent by commercial customers. Persistent violators of the Phase I reductions could lose all electrical power for up to 30 days. However, the city has not yet implemented the penalty provisions of Phase I and is not expected to begin enforcing penalties until sometime after March 30, 1974.

Phase I has been in effect for such a short time that it was difficult to assess its effectiveness. Nonetheless, early data evaluated by the Department of Water and Power pointed to widespread success for the program as electricity use was shown to be dropping by 14 percent to 18 percent. City officials had programmed annual Phase I reductions to result in a 12.1 percent decline in usage compared to 1973. If present trends continue, city officials believe their goal of cutting residual oil from 24 million barrels to 18 million barrels can be met. Further reductions in residual oil needs are also hoped for. Moreover, conservation measures and recent large, though costly, purchases of oil have enabled the Department of Water and Power to predict that fuel supplies will hold at least through September of 1974 at sufficient levels. Phase II of the Emergency Energy Curtailment Program, to be implemented at Mayor Bradley's direction, calls for more sweeping conservation measures. Phase II prohibits all illuminated outdoor advertising signs and lighting for all non-commercial outdoor cultural and recreational activities. Commercial outdoor recreational or cultural activities would have to reduce electrical use by up to 50 percent. Under Phase II, residents would have to reduce electrical consumption by an additional 2 percent over Phase I; industrial customers by an additional 6 percent; and commercial users by an additional 13 percent.

STATE ACTIONS

On January 3, 1974, the California Public Utilities Commission issued electrical curtailment orders to all investor-owned utilities effective immediately. The Commission's order did not apply to municipally-owned utilities in Los Angeles, Glendale, Pasadena and Burbank. The order was directed toward private enterprise utilities such as the Southern California Edison Company, the San Diego Gas & Electric Company and the Pacific Gas & Electric Company. The goal of the Public Utilities Commission order is to reduce energy consumption by 15 percent throughout the State.

PROMOTERS SEEK FAST PROFITS

Los Angeles was quite literally desperate for oil as 1973 wore on and city officials began to contrast reserves on hand with projected needs for 1974. As the domestic oil suppliers became increasingly reluctant to bid on the city's needs, the Department of Water and Power turned to new and often uncertain sources for its oil. Shopping now in Europe, primarily in Italy, and elsewhere in the world, Water and Power Department representatives entered into negotiations which were frequently secretive. On occasion, the city was not sure of the origin of the oil it bought. "We just contract for the physical properties" of the oil, said F. Carl Osborn, Electrical Engineer in Charge of Power Operations for the Department.

With the city desperate for oil, less than forthright persons tried to exploit the Los Angeles market. The Department of Water and Power, which is located at 111 North Hope Street near City Hall, was besieged by promoters who insisted they had connections in foreign oil capitals and that, if the price were right, they could obtain large quantities of oil for Los Angeles. The Department soon found that few of these promoters had any genuine experience in oil affairs. In addition, the would-be brokers were discovered to have no genuine connections in oil producing countries and were, to one degree or another, imposters. But the Department, however suspicious, could not turn them away without a hearing. The city was running out of oil and did not wish to run the risk of refusing to hear all offers on the premise that some of them might be legitimate.

The job of listening to these promoters and following up on their proposals fell to John O. Russell, Fuel Supply Administrator for the Power Operating and Maintenance Division of the Department. Characterizing this aspect of his work as a "boiler room operation," Mr. Russell said that over the past several months-since word began to spread of the short oil supply in Los Angeles-he has been visited and telephoned by dozens of individuals who described themselves as oil brokers and agents and who claimed to have large quantities of residual oil to be shipped to Los Angeles.

Mr. Russell said these promoters frequently had some background in commodity trading. They assume they can apply the same principles to oil transactions, Mr. Russell said, adding that this assumption is wrong as petroleum negotiations follow procedures unique to themselves. He explained, "These people come to the Department with a similar sales pitch. They say they have a supplier who will sell us the oil. But first we must send a wire or letter saying the Department is 'ready, willing and able' to buy the specified amount of oil. Usually, I will send the ready, willing and able' wire. But in every instance, no oil transaction has resulted. In most cases, we don't even receive a reply to our cable. What the so-called broker has counted on is the possibility that with the 'ready, willing and able' wire from us he can match up with a real life supplier. The broker would then make a big profit. That may work in commodities trading. But it's never happened here. The oil business simply doesn't work like that."

Mr. Russell said the would-be brokers come from a variety of walks of life. One had a Ph.D. in astrophysics, he said. Another was a lithographer. One man insisted he could supply a large shipment of oil if only Mr. Russell would leave immediately with him for an urgent meeting in Beirut. Another had already purchased a ticket for Mr. Russell to fly with him to Paris for further negotiations. The biggest proposed sale was put forward by a group of men who promised a billion dollar shipment of oil. Another promoter based his proposal on a bogus contract that included a counterfeit government seal from a Far East country. Some of the proposals, in fact, may constitute fraud and several promoters are under investigation by the Los Angeles County Sheriff's Office.

PROMOTERS IN BURBANK

Los Angeles, which last December found itself short some 11 to 12 million barrels of residual oil, is a huge and lucrative target for would